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NEW JERSEY: LAND OF THE 110,500% MARGINAL RATE
September 01, 2005
Sometimes it really doesn't pay to earn that extra buck. The BenefitsBlog reports how the Garden State's $20,000 exclusion for pension income disappears when income reaches $100,000 - with no phase out. It works like this:
That means a retired couple earning $100,001 could end up paying $1,105, or 67 percent more income tax than a couple making $99,999 because the second couple can continue to exclude up to $20,000 from taxable pensions, IRAs or 401(k)s and the first couple cannot.
That means a 110,500% marginal rate. The marginal rates are the rates you pay on each additional dollar earned. If you pay 10 cents for each additional dollar you earn, you have a 10% marginal rate. If you pay $1 tax for each dollar you earn, you have a 100% marginal rate. If you pay $10 for each dollar you earn, that's a 1000% rate; and if you pay $1,105, that's a 110,500% rate.
Enjoy your New Jersey retirement.
BenefitsBlog has the full story.
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